Gilead invests $5 billion to deepen ties with biotech Galapagos

(Reuters) - U.S. antiviral drugmaker Gilead Sciences will invest $5.1 billion in a major expansion of its partnership with Belgo-Dutch biotech Galapagos NV , news that lifted Galapagos's shares more than 18% to an all-time high on Monday.

Reuters July 16, 2019 03:05:07 IST
Gilead invests $5 billion to deepen ties with biotech Galapagos

Gilead invests 5 billion to deepen ties with biotech Galapagos

(Reuters) - U.S. antiviral drugmaker Gilead Sciences will invest $5.1 billion in a major expansion of its partnership with Belgo-Dutch biotech Galapagos NV , news that lifted Galapagos's shares more than 18% to an all-time high on Monday.

The move will bring Gilead's new chief executive Daniel O'Day growth opportunities in Galapagos's specialist areas including fibrosis and arthritis, and give Galapagos deep funds to develop and commercialize its drugs.

The two companies are going after inflammatory conditions, one of the most lucrative areas in the pharmaceuticals industry.

AbbVie's Humira, used to treat rheumatoid arthritis and spondylitis, racked up nearly $20 billion in sales in 2018, while Amgen and Pfizer's Enbrel still brings in $7 billion annually after 20 years on the market.

As part of the deal, Gilead will spend $1.1 billion to lift its Galapagos stake to 22% from 12.3%. The rest of the investment will be used to develop and commercialize its treatments for a 10-year period, the companies said.

"We chose to partner with Galapagos because of its pioneering target and drug discovery platform, proven scientific capabilities and outstanding team," O'Day said in a statement.

Galapagos, which has more than 500 scientists, is part of a thriving biotech scene centred around Belgium, fuelled by tax breaks and other incentives, with companies spun out of universities now listed on the local stock exchange.

The deal follows a spate of biotech mergers last year including the acquisition of fellow Belgian biotech Ablynx by French drugmaker Sanofi for 3.9 billion euros ($4.4 billion) after a bidding war with Novo Nordisk .

Galapagos's most advanced drug in development is filgotinib, an experimental compound being advanced for rheumatoid arthritis and inflammatory bowel disease that Gilead intends to submit to the U.S. Food and Drug Administration this year.

The two companies first partnered four years ago to develop a drug targeting inflammatory diseases, with Gilead paying more than $2 billion for the development of filgotinib, as well as an equity stake in the European firm.

Gilead is paying a 10% premium to Friday's closing price for the increased stake in Galapagos, but has a 10-year standstill agreement preventing it from raising its stake above 29.9%.

"We see a logical rationale for the deal and believe that over time the closer relationship should help both companies," RBC analyst Brian Abrahams wrote in a note, reiterating his "buy" recommendation on Gilead stock.

Shares in Galapagos rose 18.8% to 152.20 euros.

Galapagos said it would also seek shareholder approval to allow Gilead to further increase its ownership to up to 29.9%.

The companies will share future development costs for filgotinib equally, replacing the 80-20 cost split provided by the original agreement, they said, with Galapagos gaining a broader role in the treatment's commercialisation in Europe.

Gilead will get access to Galapagos's drug pipeline outside of Europe.

Gilead will nominate two people to Galapagos' board.

Barclays, Centerview Partners and Lazard acted as financial advisers to Gilead while Moelis & Co and Morgan Stanley advised Galapagos.

(Reporting by Ismail Shakil in Bengaluru; Additional reporting by Shubham Kalia, Phil Blenkinsop in Brussels and John Miller in Zurich; Writing by Georgina Prodhan in London; Editing by David Evans)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.